Michal Ždanský Considering the evolution of the mobile market in recent quarters, it seems that smartphones, a segment that continues to experience a global boom, are catching up to where the PC market has reached. Smartphones are starting to become a commodity and while the high-end is fairly stable with a minor share of the overall pie, the mid-range and lower-end are starting to merge and a race to the bottom ensues.
This trend is felt most by Samsung, whose sales and profits have fallen over the past three quarters. The Korean electronics manufacturer is currently facing battles on two fronts – in the premium high-end, it is fighting with Apple, while in the lower classes, where most of the company's turnover comes from, it is fighting with Chinese manufacturers pushing the price lower and lower. And he stops doing well on both fronts.
The dominance of Apple in the high-end segment is indicated by the latest figures of the analytical company ABI research. She said in her latest report that the iPhone, specifically the 16GB iPhone 5s, is still the world's best-selling phone, while Samsung phones, the Galaxy S3 and S4, finished second, followed by the iPhone 4S in fifth place. In addition, the Chinese Xiaomi, currently the most predatory manufacturer on the Chinese market, which gradually intends to expand outside of China, made its way into the top 20 ranking.
It was China that was supposed to be the place of Samsung's next big growth, and the Korean company invested billions of dollars in distribution channels and promotion, but instead of the expected growth, Samsung is starting to lose the market to rivals Xiaomi, Huawei and Lenovo. Chinese manufacturers have already managed to raise their products to the point where they are completely competitive with Samsung's offer, and at a significantly lower price. In addition, thanks to its status among Chinese customers, Xiaomi does not need to invest in promotion and distribution as much as a Korean company.
[do action=”quote”]As devices become a commodity, the real difference is ultimately price.[/do]
Samsung is facing the same problem in the smartphone market as non-Apple PC makers. Because they don't own the platform, they don't have much of a means to differentiate themselves against the competition in terms of software, and as devices become a commodity, the real differentiator is ultimately price. And the majority of customers listen to this. The only option for phone manufacturers is to "hijack" Android and build their own ecosystem of apps and services, as Amazon has done. But most manufacturers do not have the resources and talent for such differentiation. Or they just simply can't make good software.
In contrast, Apple, as a device manufacturer, also owns the platform, so it can offer customers a sufficiently different and attractive solution. It is not for nothing that it accounts for more than half of the profits in the entire PC segment, although its share among operating systems is only between seven and eight percent. The same situation persists among mobile phones. Apple has a minority share of around 15 percent with iOS, yet it it accounts for 65 percent of the profits from the entire industry thanks to its prominent position in the high-end
Samsung has been able to gain a foothold in the high-end segment thanks to several factors - availability with most carriers, creating a market for phones with a larger screen and generally better iron against other hardware manufacturers. The third named factor, as I mentioned above, has already slowly disappeared, as the competition, especially the Chinese one, can offer similarly powerful hardware at a lower price, moreover, the difference between low-end and high-end is generally being erased. Apple has also significantly expanded the availability of its phone, most recently with the largest operator in the world, China Mobile, and the largest Japanese operator NTT DoCoMo, so another factor that played in favor of Samsung is also disappearing.
Finally, most manufacturers are already moving into the segment of phones with a large screen, even Apple is to introduce a new iPhone with a screen of 4,7 inches. Samsung can thus very quickly lose its place in the lucrative high-end market, because for the same price of the flagship, the iPhone will be a better choice for the average customer, even if he wants a larger display, users who prefer Android will probably reach for cheaper alternatives. Samsung will have only a few options left - either it will fight on price in a race to the bottom or it will try to push its own Tizen platform, where it has the opportunity to differentiate itself in terms of software, but again it will start on a green field, moreover, probably without the support of some key services and application catalog .
The development and commoditization of the mobile market shows how insignificant the market share of the operating system can be. Although Android is the most widespread mobile operating system in the world, its success may not necessarily reflect the success of manufacturers. The truth is that Google does not need their success, because it does not profit from the sale of licenses, but from the monetization of users. The whole mobile situation is perfectly described by Ben Thompson, who notes that with smartphones it really is like with computers: "It's the hardware manufacturer with its own operating system that has the biggest profits. Everyone else can then eat themselves alive for the benefit of their software master.”
Good article, thanks for it.
I have to agree, well written
It is difficult for Samsung to create an ecosystem on Tizen because it has already been postponed
Excellent summary, it can't be said better.